Preparing a business for sale is a significant undertaking that should not be taken lightly. Its best to ready yourself and the business in advance. In this article Anthony John Rigney of Quorum Business Advisors gives Important insight into some of the key aspects of preparation.
- Financial: Ensure that your financial documents are up to date. Tax returns must be filed for the previous year. Your CPA should prepare a year-to-date P&L statement ( and matching balance sheet) for the current year and be prepared to update these on an ongoing basis.
- Documentation: Have key documents ready to review. In addition to the financial records you will need to have the following available. Leases, licenses, employee agreements, operating manuals, Insurance policies, customer lists and supplier agreements.
- Valuation: Your business broker will be happy to provide a BPO (Broker Price Opinion). This will give you a solid idea of the price you can expect. For larger concerns we recommend getting a certified business appraisal. Once again we can assist you with this.
- Owner Dependence: Buyers are wary of businesses that are over reliant on the owner. Put a team in place that allows the business to run smoothly in your absence. If you can take a long vacation with ease then you are on the right track.
- Address Liabilities: Settle any pending lawsuits. Address any headaches such as a problem employee. Buyers do not want to inherit your problems.
- Operational Efficiencies: Streamline operations and implement standard operating procedures (SOPs). A business that runs efficiently and has clear procedures in place is more attractive to buyers.
- Transition Team: Make sure your team on the same page. Your lawyer and accountant are critical components and need to willing to work with your broker to ensure a smooth transaction. These professionals ideally will be experienced in business transactions. Your lawyer will need to protect you legally but not create unnecessary roadblocks. Your CPA will need to provide information in a timely manner as needed. Everyone has to work together to get this done.
- Confidentiality: A good business broker knows how to keep the sale confidential. You do not want your employees, customers, competitors and vendors finding out your business is for sale. This is one of the key reasons not to try to do this yourself.
- Be Transparent with Potential Buyers: Trust is critical to a successful transaction. Be open about your positives and negatives and don’t try to hide anything. What you think as being a negative may be a positive for the buyer if it presents an opportunity for improvement. Moreover by being transparent you build trust with the buyer and this will help get the deal across the finish line.
- Be mentally prepared. Selling a business can be taxing and an emotional roller coaster. Make sure you are ready for it. I encourage business owners to have a plan for their life after the sale. Having something to look forward to makes the process a lot easier.
Preparing a business for sale takes time, often more than owners anticipate. Starting early and being thorough in your preparations can help you get the best price and ensure a smoother transition to new ownership. If you are considering selling your business and would like more information we would love to speak to you. Please Contact Us.